Australia’s Woodside Petroleum has unveiled plans to invest US$5 billion in “emerging new energy markets” by 2030 as it looks to transition towards a lower-carbon future.
Chief executive Meg O’Neill said Woodside expects its core liquefied natural gas business to remain an important part of the energy mix for “decades to come”, but the company is also looking to position itself early to support the decarbonisation goals of its customers.
Woodside did not detail exactly where the US$5 billion would be directed, however the company is exploring opportunities in hydrogen, carbon capture and storage and renewables.
“We have a vision to build a low-cost, lower-carbon, profitable, resilient and diversified portfolio. Woodside aims to do this by leveraging our world-class Tier 1 portfolio and allocating capital to the right opportunities at the right time,” O’Neill said.
“Our investment decisions are informed by robust market analysis, so we understand macro trends for our products and a range of outcomes dependent on different climate scenarios. Individual opportunities are assessed through a disciplined capital allocation framework and clear investment criteria, always considering the fit with our emissions reduction targets and shareholder returns.”
By the mid-2020s, the company is hoping to achieve start-up of new energy projects, the export of ammonia from Australia, scale up its carbon offset projects and to have developed CCS opportunities.
From 2030 and beyond, Woodside is expecting to become an exporter of liquid hydrogen and to scale up its CCS activities.
Woodside targets 3GW lower-carbon capacity
O’Neill told investors on Wednesday that by 2030, Woodside would have the the potential for roughly 3 gigawatts of capacity from lower-carbon energy solutions.
The company has recently announced progress on several new energy projects, including this week’s announcement it is planning an up to 550-megawatt hydrogen facility in the US state of Oklahoma.
Last month the company revealed it had secured land for its proposed H2TAS green hydrogen development in the Australian state of Tasmania, with the site having the potential to eventually support up to 1.7GW of electrolysis for hydrogen and ammonia production.
In October, the company also revealed plans to establish a “world-class” hydrogen and ammonia production facility near Perth, Western Australia, which followed an announcement it was teaming up with Bill Gates-backed Heliogen to build a commercial-scale demonstration facility in California using the latter’s “breakthrough” solar technology.
Woodside is also contemplating a potential solar power project near Karratha, in Western Australia, that would supply about 50MW of solar energy to Woodside’s Pluto LNG facility, and a further 50MW to Perdaman’s proposed urea facility on the Burrup Peninsula, which will produce blue ammonia from natural gas.
“Our projects are designed to be phased, starting small with the potential to build scale. In each case the project location has been chosen for specific reasons, preferably near available renewables or close to market, ensuring they are customer led,” O’Neill said Wednesday.
“We expect that in the mid-2020s the transition to new energy will be underway, including the start-up of the first of our own projects.”
Lower returns on new energy
O’Neill also revealed during the investor presentation on Wednesday that Woodside is anticipating a lower internal rate of return (IRR) from its new energy projects compared to its oil and gas business.
“New energy projects tend to carry a lower risk profile as they are not exposed to upstream or resource risk in the way a traditional oil or gas development is,” she explained.
“There is also a lower financial barrier to entry, given the lower capital required for development. The lower project risk means a lower return can be expected. We will target an internal rate of return greater than 10% and payback within 10 years.”
In comparison, Woodside is targeting an IRR greater than 15% for future oil developments, with a payback of within five years.
Meanwhile, it is targeting an IRR greater than 12% and payback within seven years for gas projects, which O’Neill noted typically generate long-term cash flows and tend to be resilient through the commodity price cycle.
The drive towards lower carbon projects comes as Woodside is targeting a 15% reduction in its net Scope 1 and 2 emissions by 2025, a 30% reduction by 2030 and net zero emissions by 2050 or sooner.
O’Neill said Wednesday the company was on track to meet its 2030 emissions reduction targets and was working towards meeting its net zero ambition.
“In addition to offsets, we are assessing opportunities for carbon capture and storage, including assessing an opportunity to develop a large-scale, multi-user project near Karratha, Western Australia. Carbon capture and storage will support further emissions reduction after 2030,” she said.